Software Development Services
How much does the average company spend on software development services?
i) Manufacturing (MFG) - Naics codes 31-33
- Analysis of technology investment data found that IT budget as a percentage of revenue (as of 2017) for the Manufacturing sector was 1.95%, compared to an average of 3.28% for all sectors.
- Deloitte global CIO survey found that this had risen to 2.14% by 2018.
- Society of Information Management’s (SIM) annual survey of senior IT executives survey concluded that as a percentage of IT budget, software development and maintenance was 19% in 2019, and the figure was expected to be the same for 2020.
- CSI Market statistics reveal that the average revenue per employee in the manufacturing industry was $216,110 for Q3 of 2020.
- An estimate for the average amount spent on software development services is made using the figures given above, based on the number of employees in the company. For a company with 100-499 employees, taking the median value 300 and multiplying this by the average revenue per employee for Q3 in 2020 ($216,110), this gives an estimated revenue figure of ~$64.8m. Next, IT budget was found to be 2.14% of revenue in 2018. Multiplying this gives an estimated IT budget of ~$1.39m. And finally, software development was shown as 19% of IT budget, so multiplying this gives an estimated figure of ~$264,000 spent on software development on average by manufacturing companies with 100-500 employees.
- The same calculation can be used to estimate software development spending for companies with 500-1,000 employees. Performing the same calculations as above, but with a median amount of 750 employees, gives an estimated figure of ~$659,000 spent on software development on average by manufacturing companies with 500-1000 employees.
- An estimation for the average amount spent on software development for companies with 1,000-1,500 employees (using a median value of 1250 employees) is ~$1.1m
ii) Wholesale Trade — Naics code 42
- The Consumer business and retail sector (which includes wholesale trade) has an average IT budget of 2.03% of revenue, as of 2018.
- Average revenue per employee in the Wholesale sector was $743,805 for Q3 of 2020.
- Performing the same calculation as in i), average spend on software development for companies with 100-500 employees was estimated to be ~$861,000, for companies with 500-1000 employees ~$2.2m and for companies with 1000-1500 employees ~$3.6m
iii) Transportation and Warehousing - Naics code 48-49
- The 2019 Logistics Tech Trends Report found that 56% of transportation and logistics companies spend more than $100,000 on software every year, with 81% expecting their software spending to increase over the next two years.
- Average revenue per employee in the Transport and Logistics sector was $273,694 for Q3 of 2020.
- The Flexera 2020 State of Tech Spend reported that the average IT spend by Transportation and Logistics companies was 5.3% of revenue.
- Our calculation for the estimated spend on software development gives a figure of ~$827,000 for companies with 100-500 employees, $2.1m for companies with 500-1,000 employees, and $3.4m for companies with 1,000-1,500 employees.